Cases: Indemnity

November 30, 2016

Any Other Result Would Retard Individuals Going Into “Corporate Service.”

The Delaware Supreme Court, in Trascent Mgt. Consulting, LLC v. Bouri, Case No. 126, 2016 (Del. Supreme Ct. Nov. 28, 2016), was confronted with an LLC’s claim that it did not have to advance costs of defense to a “key man” employee in a contractual breach suit brought by the LLC based on LLC’s plenary claim that key man had fraudulently induced his employment through upfront misrepresentations. The high court rejected this argument because corporate advancement of defense costs is to be encouraged under Delaware law until a court makes a final, nonappealable determination that indemnification of the key man was not required. It found that entertainment of the plenary “fraud in the inducement” defense would subvert the advancement procedures and reduce the ability to attract capable individuals into corporate service.

Talk about a swing of events—something which can happen where an appellate court independently reviews a contractual provision under the de novo review standard.

In Alki Partners, LP v. DB Fund Services, LLC, Case No. D068063 (4th Dist., Div. 1 Oct. 24, 2016) (published), investors losing millions of dollars sued the hedge fund administrator for breach of contract. Unfortunately, administrator won a summary judgment against investors, a ruling affirmed on appeal. But, for investors, the real “stinger” was that the lower court awarded administrator $3,027,237.96 in attorney’s fees based on a contractual provision, “Standard of Care,” which provided for administrator to be indemnified for losses, including reasonable attorney’s fees “resulting in any way from the performance or non-performance of Administrator’s duties hereunder ….”

The appeal of the fees clause was successful, resulting in a complete reversal of fortune in terms of a reversal based as a matter of law. Not only did the appellate court apply a de novo standard of review, but gave investors a further break by considering the legal entitlement argument although not raised in investors’ briefing (even though it did solicit and receive supplemental briefing from both sides upon its own notice of desiring same).

The problem for administrator was that the so-called fee entitlement provision was only a third-party indemnification provision not allowing for fees between contractual litigation combatants, finding the clauses virtually indistinguishable from those construed similarly in Carr Business Enterprises, Inc. v. City of Chowchilla, 166 Cal.App.4th 14, 22-23 (2008) and Myers Bldg. Industries, Ltd. v. Interface Technology, Inc., 13 Cal.App.4th 949, 969 (1993). The 4/1 DCA distinguished cases having differently worded clauses, many of which can be found under our Home Page category, “Indemnity.” However, the reviewing court even went further, offering an additional sentence which would have arguably allowed fee recovery to administrator: “It would have been simple for the parties to provide: If any action is commenced to enforce or interpret the terms of this agreement, the prevailing party shall be entitled to recover reasonable attorney fees.” There you go, transactional attorneys!

September 08, 2016

However, Vallejo Likely Owes Statutory Indemnification Duties To Officers For Both Awards.

The Ninth Circuit in Deocampo v. Potts, No. 14-16192 (9th Cir. Sept. 8, 2016) (published) confronted an issue under a Chapter 9 municipality bankruptcy plan, harkening to say that more of these issues may be confronted as local governments face economic problems. The specific issue was whether a compensatory verdict and a later attorney’s fees award against individual police officers, who had been defended by the City of Vallejo a trial, were discharged by City’s Chapter 9 bankruptcy plan where no provision provided for an adjustment as it related to the officers. The Ninth Circuit answered “no,” but with a caveat. California Government Code section 825 does mandate indemnification to municipal employees acting “within the scope of their employment,” with the appeals court hinting that the police officers may well have to be indemnified by City given that the verdict/award were post-petition debts under indemnity principles.

May 08, 2016

Government Code Section 996.4 Involved, With Employee Entitled To Introduce Evidence To Rebut “Outside The Scope” Defense By Government.

Public employees are entitled to be defended and indemnified for third party claims arising within the scope of their employment. The governmental employer has a choice: provide a defense/pay any claim or judgment against the employee or have the employee fund his/her own defense and sue for reimbursement of fees, costs, expenses, against governmental employee but be subject to no recovery if the conduct arose out of actual fraud, corruption, or malice. (Gov. Code, §§ 825 et seq., 996.4; Stone v. Regents of Univ. of California, 77 Cal.App.4th 736, 746 (1999).)

What happened in Daza was that a student sued an L.A. Community College guidance counselor for sexual assault, a claim which was denied by employee. College District refused to defend employee, which triggered employee to file a cross-complaint for indemnify and reimbursement of fees in the sexual assault case. District settled the case with the student, but opposed employee’s defense cost reimbursement/indemnity suit on the ground that the mere allegations of sexual assault meant the employee’s actions were outside the scope of employment. A lower court dismissed the case after agreeing with District, a determination reversed on appeal by the 2/8 DCA.

The appellate court ruled that the section 996.4 reimbursement decision on “outside the scope of employment” was a factual question and cannot be determined based solely on the allegations of the plaintiff in a case against the employee—the employee was entitled to present evidence showing defense costs reimbursement was justified. Although the allegations did show conduct outside the scope of employment by a guidance counselor, employee must be permitted to present evidence to show the conduct was within the scope and did fall within the “no recovery” exceptions of section 996.4. Otherwise, there would be a lop-sided playing field: employer can present evidence on the issues but employee was limited to allegations about conduct being outside the scope. There also would be a pernicious policy “end result” by which a governmental entity could settle with the plaintiff and then insulate itself from 996.4 exposure to employee based solely on allegations by a party who had settled with the government and who would have no problem presenting pleadings which fell outside the ambit of 996.4.

Code of Civil Procedure section 1021.6 has a fee-shifting provision which allows a prevailing party on a claim for implied indemnity to recover attorney’s fees if the indemnitee can show three things: (1) it had to bring or defend an action “through the tort of the indemnitor,” (2) the indemnitor refused to bring or defend the action after proper notice, and (3) the indemnitee was without fault or obtained a final judgment in its favor. This provision was by the Legislature to overrule a contrary turndown of indemnitee fee-shifting in Davis v. Air Technical Industries, Inc., 22 Cal.3d 1 (1978). (See John Hancock Mutual Life Ins. Co. v. Setser, 42 Cal.App.4th 1524, 1532 (1996).)

In Andamiro Co. Ltd. v. Round One Entertainment, LLC, Case No. B258005 (2d Dist., Div. 7 Feb. 16, 2016) (unpublished), an arcade owner sued in a negligence/products liability action subsequently filed a cross-complaint against the game’s manufacturer/distributor which was also named in plaintiff’s suit. Arcade owner obtained a summary judgment on the complaint, the manufacturer/distributor settled with plaintiff, and manufacturer/distributor stipulated to a judgment on arcade owner’s cross-complaint. The arcade owner moved for and received a fee award of $27,744.51 under section 1021.6, a ruling affirmed by the Second District.

Manufacturer/distributor’s main argument was that arcade owner never actually prevailed on the implied indemnity cross-claim (the third statutory requirement), but that was belied by the stipulated judgment in favor of arcade owner on its cross-complaint—the necessary judicial determination for 1021.6 purposes. Section 1021.6 is broad, only requiring that the indemnitee “was involved” in the action “due to the tort” of the indemnitor and allowing recovery of fees even if the indemnitee’s involvement includes defending against claims that it was negligent. (Slip Op., p. 12.) The first and second requirements, too, were met such that the fee award was affirmed.

In Judicial Council of California v. Jacobs Facilities, Inc., Case Nos. A140890/A141393 (1st Dist., Div. 1 Aug. 20, 2015) (partially published; fee discussion not published), defendants were awarded contractual attorney’s fees under an indemnity provision and a guaranty. That ruling had to be overturned given that they were no longer prevailing parties based upon a reversal by the appellate court. However, the reviewing court put the kibosh on fee entitlement altogether, determining (1) the indemnity clause was a true third-party indemnity clause which should not be transformed into a fee-shifting clause, and (2) the guaranty could not confer an independent right to fees where the underlying contractual obligation had no fees clause applicable to the “base” contract.

Fee Entitlement Was Present, But Reducing Request For Another Party No Abuse Of Discretion.

Esparza v. PulteGroup, Inc. (Centex),Case No. D063736 (4th Dist., Div. 1 May 14, 2015) (unpublished) was a construction defect/personal injury action by several residential homeowners against Centex (which subsequently merged into the PulteGroup), which in turn cross-complained against some subcontractors (including for express indemnity based contractual clauses). Two subcontractors obtained either a nonsuit or directed verdict on the indemnity cross-claims, then seeking attorney’s fees. The lower court denied fees altogether for first sub, but granted second sub $149,111 in fees (although reduced from the second sub’s request).

The appellate court reversed the fee denial to the first sub, because even Centex recognized there was an express indemnity claim that was nonsuited in favor of the prevailing sub. As far as the second sub’s appeal, there was no abuse of discretion in the lower court’s decision to cut some of the request for a second trial attorney’s efforts. However, there was a “double cut” deduction of $2,448 for certain billed hours, such that the $149,111 award got increased by that $2,448 amount.

April 15, 2015

On April 2, 2015, we posted on Rideau v. Stewart Title of California, Case No. D065751 (4th Dist., Div. 1 April 1, 2015), which was unpublished at the time. It affirmed the trial judge’s denial of a fee request after determining that the fees clause was really an indemnity clause not allowing reciprocal recovery under Civil Code section 1717. We can now report that the case was certified for publication on April 14, 2015 and reposted to correct a minor typographical error on April 15, 2015.

April 02, 2015

Language Of Disbursement Clause Was Crucial In A De Novo Appellate Review Situation.

At our home page sidebar under “Indemnity,” we have posted many times--and you can gather our posts--on whether language in contractual indemnification clauses gives rise to contractual attorney’s fees recovery. Rideau v. Stewart Title Co. of California, Inc., Case No. D06575 (4th Dist., Div. 1 Apr. 1, 2015) (unpublished) contains a nice discussion of the cases on this subject, ultimately concluding that the language and structure of an escrow disbursement instruction applied to a third-party indemnity situation, not allowing recovery for a first party recovery (in this case, plaintiff putative condo owners in Mexico losing their $240,000 deposit, ultimately prevailing against the title company for failure to follow disbursement instructions, but losing the argument that fee recovery was allowable in a first party scenario). The result in this case was tethered to the specific syntax of the contractual disbursement clause at issue, but did follow the logic of Baldwin Builders v. Coast Plastering Corp., 125 Cal.App.4th 1339 (2005) in significant respects. The appellate court particularly focused on parsing the language in one disbursement clause to show that there was a dichotomy between third party and first party claims—with the fees element only applicable to third party claims.

In American Rag Cie, LLC v. Haralambus, Case No. B246285 (2d Dist., Div. 5 Feb. 27, 2015) (unpublished), plaintiff LLC sued defendant 14% shareholder for fiduciary duty, contract breach, declaratory relief and unjust enrichment, which inspired defendant’s cross-complaining against plaintiff and other cross-defendants for several tort and contractual claims. The lower court, after a bench trial, entered judgment against all parties except for plaintiff’s declaratory relief claim. Defendant moved for fees, claiming to be the prevailing party on the fiduciary duty and contractual breach claims based on an indemnification clause in the LLC operating agreement. The trial court said “no,” prompting an appeal.

The appellate court affirmed the “no” ruling. A fair reading of the indemnification clause showed it only applied to third party claims, not direct liability involving the LLC and constituent members/shareholders. This was made clear by the fact that the indemnification clause allowed the LLC board to control his defense, which would only be realistic in a third-party claim situation rather than a dispute with the LLC directly.

In Aleynikov v. The Goldman Sachs Group, Inc., No. 13-4237 (3d Cir. Sept. 3, 2014) (precedential), a Goldman Sachs computer programmer with the title of “vice president” obtained a summary judgment ruling requiring Goldman Sachs to advance him attorney’s fees incurred in his defense of certain criminal actions based upon an indemnity agreement. However, the Third Circuit reversed, finding that the “officer” language in the indemnity was ambiguous and extrinsic evidence was proper to determine if computer programmer fit the bill. Mr. Aleynikov has asked for a rehearing of the appellate ruling.

U.S. District Judge Wilken Refuses to Defer Fee Ruling Under Patent Statute For Prevailing Parties Hewlett-Packard and Apple in Linex Technologies Case.

Linex Technologies, Inc. lost an infringement action involving certain spread spectrum claims as against Hewlett-Packard Co. and Apple Inc. They then brought a request for reimbursement of attorney’s fees under 35 U.S.C. § 285, claiming the case was “exceptional” for purposes of fee recovery. Linex countered that the case was not exceptional and that the fee matter should be put on hold until the Federal Circuit decided the merits appeal on the non-infringement rulings.

U.S. District Judge Claudia Wilken disagreed in Linex Technologies, Inc. v. Hewlett-Packard, Apple, et al., Case No. 4:13-cv-00159 CW (N.D. Cal. Sept. 15, 2014) (Doc. 413). She determined that the fee ruling should not be deferred because it would save time to have the Federal Circuit determine both the merits and fee rulings at the same time—avoiding piecemeal appeals. As far as whether the case was “exceptional” under the patent shifting statute, District Judge Wilken noted that Linex had lost similar rulings in two different for a and that Linex had sought to broaden the patent claims after one of the adverse rulings, notice enough that certain of the claims lacked merit. However, she directed the two fee requesting defendants to apportion attorney work on the unsuccessful claims and justify the claimed hourly rates, all to be done on a two-week schedule which she set in her order.

$348,372 Is Broker Fee Recovery; However, CAR Clause May Need To Be Amended To Allow Routine Costs Recovery.

Brokerage company successfully defended against a cross-complaint brought by sellers, sellers who were also successfully sued by buyers of an expensive Pacific Palisades residence in the same case. Broker defended against the cross-complaint by arguing that sellers provided it with inaccurate information or failed to disclose material information to broker. The broker and seller had a CAR form listing agreement with a broad indemnification clause covering inaccurate/undisclosed information and indemnifying against such items as judgments, fines, claims and attorney’s fees (however, “costs” were not included within the ambit of the provision).

Broker was awarded $348,372 in attorney’s fees under the indemnification clause, but the lower court denied $19,500 in requested costs because the clause was ambiguous on whether they were covered.

Broker fees spent on an amicus curiae brief before the California Supreme Court were found to be related enough to the defense of the cross-complaint so as to be worthy of compensation.

BLOG UNDERVIEW—Although unpublished, this case may suggest that the CAR form listing agreement needs to be revised to include “costs” and “expenses” if brokers want to potentially recover routine costs in a dispute, although it would also likely work both ways under Civil Code section 1717 reciprocity principles depending on the circumstances.

In Baharian-Mehr v. SGRL Investments, Inc., Case No. G048796 (4th Dist., Div. 3 Aug. 7, 2014) (unpublished), defendants in a general partnership dispute--where the original partnership agreement had a contractual fees clause favorable to prevailing parties—won a defense judgment in a multi-count complaint for an accounting, fiduciary duty breach, fraud, constructive trust, contractual breach, assault/battery, and declaratory relief brought by plaintiff who was a signatory to a partnership agreement addendum. The lower court then awarded three defendants the following respective amounts as against the losing plaintiff: $163,146.50 (out of a requested $300,954); $85,377.75 (out of a requested $88,674.75); and $130,677.25 (out of a requested $167,534.25).

Plaintiff lost all challenges to the fee awards on appeal.

Writing for a 3-0 panel, Justice Moore found that Civil Code section 1717 reciprocity principles applied because plaintiff would have recovered contractual fees had he prevailed. Plaintiff then argued that the second defendant was not entitled to fees because it was covered by the corporate defendant, a defendant which ultimately beat plaintiff, pursuant to the corporate indemnity provisions of Corporations Code section 317. This did not prevent recovery of fees under section 1717 because plaintiff “does not offer any argument why such a rule would be appropriate, leaving the corporation to hold the bag and the losing party with a get-out-of-attorneys-fees free card. It would frustrate the purposes of Corporations Code section 317 and leave the wrong party [the innocent, vindicated corporation] to pay the fees.” (Slip Opn., p. 7.) Because the claims were interrelated, no apportionment was required. Finally, the trial judge did reduce the requested fees such that he showed care in awarding the amounts he did. Affirmed across-the-board.

​Dalton v. Francis, Case No. H033247 (6th Dist. June 26, 2014) (unpublished) involved a buyer lawsuit against seller and dual real estate agents for nondisclosures in connection with a residential sale regarding a dilapidated septic system. The problem was that seller and individual brokers negligently passed on information about the housebeing connected to a public sewer, but with the infirmities originating from broker conduct. Eventually, buyers won the suit and won contractual attorney’s fees of $262,909.50 against sellers. (The corporate brokerage business went bankrupt, so individual brokers were still involved.) However, the lower court also found that the buyers could get total reimbursement from individual brokers for buyers’ fee exposure to sellers based on an implied indemnity theory (likely, implied contractual indemnity). Later, the trial judge determined that seller recapture defense costs in the buyer lawsuit from individual brokers based on the tort of another doctrine.

​Sellers appealed, getting some relief on appeal.

​The lower court’s determination that the $262,909.50 pro-buyers fee award could not be "passed" through by sellers for reimbursement from the individual brokers. The reasons: (1) implied contractual indemnity--individual brokers were not parties to the listing agreement with sellers (only the bankrupt brokerage business was a party); and (2)equitable indemnity—although brokers were jointly and severally liable with sellers as far as buyers’ damages, this theory could not be used to create a new attorney fee exposure basis under the American Rule, or else the appellate court would be creating a new exception through judicial fiat.

​Then, what about sellers being able to recoup defense fees in the suit against individual brokers? Well, the tort of another doctrine did work as an exception to the American Rule and did provide a basis for fee recovery under this doctrine. (Gray v. Don Miller & Associates, Inc., 35 Cal.3d 498, 507 (1984).)

​Finally, individual brokers balked at some nonstatutory costs claimed by sellers under the tort of another doctrine. However, the appellate court determined they were proper "damages," in line with what the trial judge found.

May 16, 2014

Individual who was deleted from an arbitration award, because he was neither served nor consented to an arbitration, was frustrated because the lower court denied him fees under an arbitration agreement provision and AAA Rules in Fujian Peak Group, Inc. v. Huang, Case No. D063296 (4th Dist., Div. 1 May 15, 2014) (unpublished). He lost an attempt to recoup $109,000 in fees and $10,700 in costs.

His appeal of the fee denial did not gain anything further.

The problem was that was no clear fee entitlement basis. The fee clause in the arbitration agreement was not specific enough as to the individual litigant, and the general former AAA Rule-43(a) allowing an arbitrator general power to order “just and equitable relief” should not be construed broadly to encompass fee recovery. As far as an indemnity clause with some fee language, it was not equivalent to a prevailing party fee clause, based upon the reasoning of Baldwin Builders Co. v. Coast Plastering Corp., 125 Cal.App.4th 1339 (2005)—with anyone wanting more information in this area needing to go to our home page and clicking on the “Indemnity” category on the left hand side. Fee denial affirmed.

Jeld-Wen, Inc. v. Southcoast Sheet Metal (Jeld-Wen IV), Case No. D062591 (4th Dist., Div. 1 Feb. 11, 2014) (unpublished) is the fourth appeal in this slugfest where Jeld-Wen, hit with a $1.7 million judgment by Pardee for installing leaky windows, sought indemnity from other defendants, to no real eventual positive results. CCP § 1038 allows a court to award attorney’s fees to a defendant winning an indemnity claim upon a summary judgment if it determines that the proceeding was not brought in good faith and with reasonable cause. In a third appeal (Jeld-Wen III), the reviewing court had rejected a lot of challenges brought by Jeld-Wen to a prior $210,000 fee/costs award under section 1038, especially determining Jeld-Wen had a lack of reasonable cause to pursue the action against Southcoast after September 7, 2006.

The lower court, after the third appeal, awarded Southcoastanother $129,760.50 in section 1038 fees, which prompted the fourth appeal.

Jeld-Wen lost its further challenges. First, the appellate court dismissed the idea that an additional summary judgment grant was required; after all, Southcoast had already reaped this victory such that further appellate defending fees were in order to uphold the prior summary judgment grant. Second, Jeld-Wen argued that only a frivolous appeal could give rise to further section 1038 costs, but existing case law dashed this contention. (Bosetti v. U.S. Life Ins. Co. v. City of N.Y., 175 Cal.App.4th 1208, 1226 (2009).) Third, the fees claims were reasonable—work on seeking Civil Code section 1717 fees was intertwined with the section 1038 fee requests and, despite the existence of any case exactly on point, there was no reason that fees/expenses pursued in enforcing the judgment should be disqualified from being considered as “defense costs” under 1038.

For purists, since Jeld-Wen I did not involve fee issues, here are our posts to the prior Jeld-Wen appellate decisions: Jeld-Wen II – February 20, 2009, and Jeld-Wen III – November 20, 2011.

December 24, 2013

City of Bell Decision Distinguishable, Because Theft-Related Charges Are Different Than City-Approved Actions For Indemnification Purposes.

Board of Directors of San Diego Employees‘ Retirement System approved City of San Diego’s proposal to purportedly “underfund” the employment retirement system in return for City’s resolution to broadly indemnify the board members from “any claim or lawsuit” arising from the approval. Earlier, an appellate court had decided the indemnification applied to two civil lawsuits brought against board members by the then City Attorney relating to the modification approval.

Now, in Lexin v. City of San Diego, Case No. D062970 (4th Dist., Div. 1 Dec. 23, 2013) (published), the same appellate court had to decide whether the indemnification allowed the board members to shift criminal defense costs to the City arising from felony conviction charges that the members violated the conflict of interest statute in the approval process.

Yes, the indemnification was very broad and did apply to criminal defense costs, said the reviewing court. City’s resolution was crystal clear in allowing for indemnification.

City also argued that Government Code section 995.8 precluded defense costs because there was no appropriate city hearing on the indemnification requests. Not so. The statute does not specify the type of hearing required, with the original City vote on resolution showing that a broad indemnification was agreed to.

Finally, City wanted the appellate court to conclude otherwise based on the indemnification denial in City of Bell v. Superior Court, 220 Cal.App.4th 236, petn. for review pending, reviewed in our October 15, 2013 post. The 4/1 DCA found City of Bell distinguishable, because it involved theft-related claims rather than City-approved actions well known to and ratified by City.

BLOG UNDERVIEW--City of Bell is subject to a petition for review, which was extended for consideration through February 11, 2014 in a December 17, 2013 state supreme court order.

October 15, 2013

Government Code Section 996.6 Does Not Permit Contractual Expansion of Defense Obligations.

Well, we know from the news about the City of Bell scandal. Former Chief Administrative Officer Rizzo brought a declaratory relief action to see if the City of Bell had to provide him a defense in City’s civil action restitution against him and certain pending criminal cases. (Media reports of October 4, 2013 reported that he plead guilty to 69 criminal counts.)

The appellate court determined no, no defense rights were owed to Mr. Rizzo. His employment agreement did not require a defense to be provided under the circumstances. Further, Government Code section 996.6, which would not allow for defense of the criminal cases, does not permit public entities to provide greater defense rights to public employees facing criminal prosecutions as a matter of contractual relationships.

Labor Code section 2802 provides that an employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties (even unlawful actions unless the employee believed them to be unlawful). Although not imposing a duty to defend, case law under section 2802 recognizes that an offer to defend the employee obviously impacts the employee’s right to indemnity under this statute.

The key issue in Carter v. Entercom Sacramento, LLC, Case No. C066751 (3d Dist. Sept. 3, 2013) (published) was whether employee’s insistence on using his own attorneys rather than accepting use of attorneys proffered by employer’s insurance carrier was a proper “necessary expenditure” under section 2802.

Here are the facts. Plaintiff seeking indemnification from former employer was an ex-part-time employee of defendant working as an assistant to a morning radio program. One morning, the radio program conducted a contest at the station for listeners involving an award for the contestant who could delay urinating the longest after drinking a large quantity of water. One of the contest participants died from vying in the contest. Plaintiff and others were fired by defendant. Deceased’s family filed suit against numerous defendants, including plaintiff ex-employee. Plaintiff tendered defense to employer’s carrier, who appointed defense counsel for him. However, plaintiff wanted a different attorney of his choice to be paid for by the carrier, filing a cross-complaint for section 2802 indemnity against employer. Employer’s carrier settled plaintiff’s suit for $25,000 each with respect to one plaintiff group as to eight individual defendants, including plaintiff, and for $2,500 each with respect to another plaintiff group. Later, a jury awarded one plaintiff group more than $16 million in damages against employer. Then, ex-employee seeking indemnification, through his independently chosen attorneys, submitted a bill seeking to recoup $807,421.22 in fees/costs (yes, that’s the number) from employer. The lower court found ex-employee’s failure to accept carrier counsel was unreasonable and that his requested fees/costs through his chosen counsel were not necessary expenditures, awarding only $1,980 in fees/costs as against employer under section 2802.

Judgment affirmed.

In this area, necessity is a question of fact, with a court looking at these factors: (1) whether the employer already agreed to provide counsel; (2) the competency and experience of the employer’s chosen counsel; (3) any time constraints impacting employee; (4) the complexity and difficulty of the litigation against employee in relation to the ability of employer-provided counsel; (5) any conflicts between employer and employee; (6) past history between the employer and employee; and (7) the nature of any problems arising in the attorney-client relationship and reasons behind them. (Grissom v. Vons Companies, Inc., 1 Cal.App.4th 52, 58, 58 n. 4 (1991).) In this case, ex-employee could not show why carrier-appointed counsel would not adequately protect his interests, especially given that he was settled out for relatively small dollars. His insistence on his own attorneys, who ran up a sizeable bill, was not necessary, with substantial evidence supporting the lower court’s factual call that this was so.

June 22, 2013

Cauzza v. Julian Union High School Dist.,Case No. D060364 (4th Dist., Div. 1 June 18, 2013) (unpublished) is a great case for you educational practitioners on the law and type of proof to demonstrate a school district’s liability or non-liability for off-campus homecoming float activities. In the end, school district prevailed on an equitable indemnity cross-complaint through a summary judgment motion, being awarded routine costs as the “prevailing party” under CCP § 1032(a)(4).

These determinations were affirmed on appeal.

Sustaining the conclusion that the school district was immune under Education Code section 44808, there was no basis for finding that cross-complainant could be a prevailing indemnitee entitled to fee recovery under CCP § 1021.6.

As to the routine costs award, district did prevail when it obtained a dismissal of the cross-complaint through summary judgment. Cross-complainant obtained neither monetary nor non-monetary relief, and obtained nothing against cross-defendant district. Because these are two express categories allowing for routine costs recovery under section 1032(a)(4), the lower court had no discretion to withhold costs from district. (Cussler v. Crusader Entertainment, 212 Cal.App.4th 356, 371-372 (2012) [discussed in our December 22, 2012 post].)

June 05, 2013

Clause Only Concerned Property Ownership, Not Litigation Between Parties.

Plaintiff won substantial damages from Bekins in a dispute involving property loss resulting from a move from one storage facility to another. Plaintiff then sought recovery of attorney’s fees under a fees clause in the Bekins contract. The lower court said “no,” prompting an appeal by plaintiff.

Like the trial court, the reviewing court concluded that the Bekins provision was a true indemnification provision rather than a fees clause. It was only concerned with whether the plaintiff owned the property and provided an indemnification to Bekins in that event; no language in the clause dealt with litigation between the parties. (Carr Bus. Enterprises, Inc. v. City of Chowchilla, 166 Cal.App.4th 14, 20 (2008).) Fee denial affirmed.

In Guess v. The Significance Foundation, Case No. D060100 (4th Dist., Div. 1 June 5, 2013) (unpublished), individual, an officer and director of a company, prevailed in a government civil rights action seeking injunctive relief, as did the company. Then, a dispute arose as to whether individual was entitled to D&O indemnification by the company for $131,000 in fees which individual paid for his defense, mainly through loans from third parties. The lower court awarded plaintiff $95,000 in fees, to be paid by company under an indemnification clause.

Company raised three arguments on appeal, all rejected.

First, it argued that the indemnity was not triggered because the director/officer did not act in good faith. However, the trial court found otherwise and company’s own pre-controversy conduct contradicted that this was so--it advanced defense costs to the individual for quite some time.

Second, company argued that individual did not “incur” legal fees because he paid for the fees through some loans by third parties. Get outta here, still “incurred” ruled the appellate court.

Last, indemnitor argued that the bills were inadmissible. However, given that a competent Evidence Code section 1271 custodian declaration was provided, the documents were business records; nothing indicated a live witness was required given the competency of the 1271 declaration.

BLOG UNDERVIEW--The individual here was a proponent of xelan? Know what that is? Answer: A program for medical professionals that is part financial management/planning, part tax planning, and part life philosophy

April 05, 2013

Code of Civil Procedure section 1038 is a specialized fee-shifting statute that allows a winning cross-defendant in an express/implied indemnity action to recover attorney’s fees if an indemnity action was not brought/maintained in good faith and without reasonable cause in a situation where the cross-defendant won a summary judgment.

Loser argued that winner untimely filed a costs memorandum, but this one was forfeited because loser did not file a challenging motion to tax costs.

On the merits of the section 1038 argument, the appellate court reversed because they did find loser had a reasonable basis to file the indemnity cross-action. However, the issue of whether loser had a reasonable basis to maintain prosecution of the indemnity action after a summary judgment of the underlying personal injury case was a different matter, with a remand necessary to calculate fees awardable for unreasonably prosecuting the action after this pivotal juncture of the case.

Although challenging a $71,934.65 fee award as an abuse of discretion, appellant did not go very far based on an inadequate record. None of the fee motion papers were included on appeal, so that the appellate court presumed adequate support in favor of the trial court’s ruling--that simple and in line with appellate tenets.

Problem here was that surety was granted a summary judgment based on the theory that $250,000 was a reasonable settlement (even though factual issues were presented by proof below), compounded by the trial court allowing fees to be considered via a postjudgment cost proceeding rather than being presented as damages during the trial. However, surety somewhat caught a break here--because the summary judgment was reversed, it had another chance to prove fees as damages at trial.

In a convoluted battle between former attorneys and clients (what else is usually involved?), an heir that could have been liable for his relative’s attorneys fees was found to have been a party to mandatory fee arbitration and ultimately prevailed. Prevailing party entitled to fees and costs? You betcha, Business and Professions Code section 6204(d) so entitled the fee award to the heir, and the trial court did not abuse its discretion in awarding a much reduced request to the prevailing party.

Defendant won a summary judgment and then garnered about $271,000 in attorney’s fees (out of a requested $325,000) based on a contractual fees clause. Plaintiff said, unfair, you did not move for fees timely under CRC 3.1702, although it did file a timely costs memorandum. However, good cause was presented for extending the fee motion proceeding based on the unexpected illness of counsel’s mother and technological complications at the attorney’s office.

In this case involving claims for expenses incurred under Labor Code section 2802 indemnify provisions, the appellate court held that a party cannot get time and costs for litigating these type of indemnity claims, much like the Trope v. Katz rule applicable to in pro per litigants under Civil Code section 1717. This resulted in a $65,743 reduction of costs to a prevailing litigant, in a 3-0 decision authored by Justice Moore.

A New Life volunteer tripped at Foodbank’s warehouse and filed a premises liability action against Foodbank (but not New Life). New Life refused tender of volunteer’s complaint as far as defending Foodbank, which responded by filing a cross-claim for indemnity based on a contract with indemnity and duty to defend provisions in Foodbank’s favor. After volunteer and New Life settled and a voluntary dismissal was filed as to volunteer’s complaint against Foodbank (likely, the “good deed”), cross-complainant Foodbank then prosecuted its cross-claim against New Life. Foodbank was awarded $62,055.19 in damages (fees and costs in defense of the volunteer action) for New Life’s failure to provide a defense pursuant to the contractual duty to defend provision.

An overview is in order before we discuss these two opinions. The jury rejected dueling direct contract and fraud claims brought by both Mr. Cussler and Crusader relating to a movie development arrangement, but did award Crusader $5 million for breach of the implied covenant of good faith and fair dealing (which left Crusader as the prevailing party). The trial court then awarded Crusader $14 million in attorney’s fees. Based on the $14 million fee award and $5 million jury award, Crusader collected about $21 million from Mr. Cussler (figuring in interest and other items). The trial court then granted yet another $150,000 in postjudgment activity fees. However, the appellate court in an earlier opinion reversed the $5 million implied covenant jury verdict and fee orders, which meant that quite a bit of restitutionary disgorgement was owed to Mr. Cussler by Crusader. After all this dust had settled, the trial court found that there was no prevailing party for fee recovery purposes but that Crusader was entitled to routine costs (“routine,” but not necessarily insignificant) of $514,237.47.

In the published decision, the appellate court agreed with the conclusion there was no prevailing party for fee recovery purposes. After all, neither side got the main objective of the litigation: both sides sought to recover millions on the contract claims, and both recovered nothing. With respect to the costs of suit awarded to Crusader, they were justified because routine costs are awardable to a defendant where “neither plaintiff or defendant obtains any relief.” (Code Civ. Proc., § 1032(a)(4); McLarand, Vasquez & Partners, Inc. v. Downey Sav. & Loan Assn., 231 Cal.App.3d 1450, 1452.)

With respect to the companion unpublished decision, Crusader was awarded $161,378.78 in fees separately under ¶ 18 of the contract between the parties, a determination reversed on appeal. The problem here was that this was an indemnity clause, not a real fees clause. The clause had an indemnification heading and contemplated indemnification only for third-party claims--easily falling within the reasoning of cases like Myers and Carr (surveyed in numerous posts under our heading “Indemnity”) precluding similar recovery of fees. The appellate court found this was reinforced by the fact that there was an arbitration/fees clause governing intellectual property rights in the contract, showing the parties knew when to agree to a fees clause when they really wanted to (but not doing so in the indemnification clause). Dirk Pitt, looks like your litigation saga is over!

September 08, 2012

Title company assigns its rights to collect attorney’s fees to two assignees based upon a provision indemnifying it as an escrow holder, inclusive of reasonable attorney’s fees and costs. The lower court denied the assignees’ fee request, determining that the facial language in the indemnification clause did not apply because a prior case resolved in title company’s favor did not involve escrow claims but related to issues of title/improper designation of the property.

BLOG UNDERVIEW--Ventura County Superior Court Judge Henry J. Walsh was the lower court deciding this fee issue. Co-contributor Mike was in front of Judge Walsh when he presided over a month jury trial in a case involving two neighboring citrus landowners.

September 01, 2012

Style and Substance of Indemnity Provision Supported the Denial Result, With Judicial Estoppel Argument Based on International Billing Services Not Prevailing.

Ni v. Yuan, Case No. B2347744 (2d Dist., Div. 1 Aug. 31, 2012) (unpublished) is yet another decision where defendants appealed a fee denial order, only to be affirmed because the defense entitlement was based on a true indemnity provision which was to be starkly contrasted with a true attorney’s fees clause. In sustaining the trial court’s denial, the appellate court focused on these factors: (1) the title of the provision (“Indemnification”); (2) the substance of the provision giving the indemnifying party the exclusive right to retain counsel, investigate, and defend a claim (usually not the case where a party in a fees clause situation has an absolute right to retain counsel of the party’s own choice); and (3) the provision was clearly targeted at third party claims, although the provision did not have to expressly reference third parties to be interpreted as a true indemnity provision.

However, there was more. The defense argued that fees were something they were entitled to because the other side sought fees in their pleading prayers, banking upon reasoning in International Billing Services, Inc. v. Emigh, 84 Cal.App.4th 1175, 1190 (2000). The appellate court dismissed this argument by observing that International Billing Services had been overruled on this point by M. Perez Co., Inc. v. Base Camp Condominium Assn. No. One, 111 Cal.App.4th 456, 465-467 (2003).

A prevailing alter ego defendant was awarded $134,469.36 out of a requested $353,047.50 in attorney’s fees based on Civil Code section 1717 and the Reynoldscase [one of our Leading Cases], but was denied recovery of fees for successfully defending on a fraud claim in a multi-phased trial.

The $134,469.36 award was sustained because plaintiff failed to present an adequate record on appeal and it hardly could be said that the trial judge abused any discretion in granting only a little over a third of the requested fees.

As far as legal challenges, appealing plaintiff relied on Hilltop Investment Associates v. Leon, 28 Cal.App.4th 462 (1994), a decision which declared it a “draw” in an alter ego case in refusing to award fees to alter ego defending litigant. The Palmer court questioned the validity of Hilltop in light of the state supreme court’s Hsu v. Abarra, 9 Cal.4th 863, 875-876 (1995) decision [another of our Leading Cases], which held that an “unqualified win” certainly qualified the prevailing party for fee recovery. Also, Hilltop did not stand for the proposition that a managing director/corporate officer sued individually and prevailing could not be found to be the prevailing party even if the corporation was found liable.

With respect to winner’s attempt to obtain an enhanced fee recovery on the fraud count, this one lacked merit because winner relied on a true indemnity clause, which has been held to not give rise to fees under Carr, Baldwin Brothers, and Campbell (cases which can be found by reviewing posts in our home page category “Indemnity”).

August 18, 2012

Judicial Estoppel Doctrine Also Found Inapt for Awarding Fees to Winning Appellate Parties, Noting International Billing Rationale Not Embraced by California Supreme Court.

Plaintiffs (lenders) must have been feeling pretty good after garnering a $450,000 plus attorney’s fees award from defendants (borrowers) based upon a simple indemnification provision which was found to have incorporated a fees clause by a lower court. The glee did not last on appeal in Dodge v. Dollarstore, Inc.,Case No. G045064 (4th Dist., Div. 3 Aug. 16, 2012) (unpublished), a 3-0 opinion authored by Justice Ikola where the fee award was reversed.

The appellate court examined the contractual clauses relied on by the lower court, determining they were indemnification provisions (plaintiffs’ duty to indemnify Dollarstore against third party claims based on plaintiffs’ breach), but not containing any express attorney’s fees clause running against defendants. (If you go to our category “Indemnity,” the reviewing court discussed cases like Myers, Building Maintenance Service (BMS), Baldwin Builders, and Continental Heller in reversing the fee award in plaintiffs’ favor.)

Now, for the chutzpah (see Blawg comment below) part of the decision. Defendants, not content to be giddy about obtaining a $450,000 reversal of fortune, then made an appellate plea to award them attorney’s fees. Go away, said the appellate court very politely. Not only was the issue not raised in the trial court (a forfeiture in and of itself), but the reciprocity/judicial estoppel theory utilized in International Billing Services, Inc. v. Emigh, 84 Cal.App.4th 1175, 1190 (2000) has never been embraced by the California Supreme Court and had been declined to be followed by the very court (the Third District) deciding International Billing. Although the forfeiture argument prevailed, our local Santa Ana appellate court did give some delicious future indications of what formulations of the judicial estoppel rule it does not agree with. Defendants obtained an award of routine costs on appeal, but not fees.

COMMENT: While not expressly referring to chutzpah in Dodge v. Dollarstore, Inc., supra, Justice Ikola has previously concurred in two opinions referring to “chutzpah”: People v. Haidl, 2010 WL 1218496 (2010) (unpublished) (“Displaying the chutzpah of a thief who demands a reward for returning the wallet he stole, counsel asserted the right to further impeachment on a subject he should never have raised”); De La Cuesta v. Benham, 193 Cal.App.4th 1287, 1297 (“Hilltop . . . is notable for the chutzpah of the party seeking fees”).

You knew where this one was going when it opened “Appellant . . . was hoist by its own petard when the trial court enforced an unfavorable choice-of-law provision in a form contract written by [appellant].” Ouch .... and it didn’t get any better.

What happened is this: an employee sued appellant crane operator (third-party tortfeasor that can be sued outside of workers’ compensation) for worksite personal injuries, with crane operator then cross-complaining against respondent employer for indemnity based on an indemnity agreement drafted by appellant crane operator and containing a Pennsylvania choice of law clause. There also was an attorney’s fees clause in the agreement, which employer conceded during the course of the litigation was reciprocal--a good concession for employer as you shall soon see.

Employee settled with third-party crane operator, but crane operator then lost its indemnity cross-claim against employer (the attempt to recoup settlement moneys paid to employee from employer), based primarily on what even the trial court thought seemed harsh but was within the contractual bargain of the two parties: Pennsylvania law, which crane operator wanted in its indemnity agreement with employer, held that an employer has no liability to a third party tortfeasor such as crane operator unless the liability is provided by a contract entered into prior to the date of the worker’s injury. As the fates would have it, the indemnity contract had been signed the day of the worksite accident, not prior to it. Crane operator lost the indemnity action, and employer was awarded fully requested fees of $161,669.87 under the fee-shifting clause based on Civil Code section 1717.

The judgment was affirmed in a 3-0 decision in Maxim Crane Works, L.P. v. Tilbury Constructors, Case No. C067054 (Aug. 8, 2012) (published), which has a great discussion on contractual expectations for use by litigators in contractual disputes.

The indemnity agreement was enforced by its terms, and there was no California public policy that nullified the Pennsylvania choice of law, especially given that the crane operator was the drafter of the contract and could have inserted contractual language requiring indemnity even if the contract was signed on the day of the accident.

With respect to the fee award, employer did a smart thing by acknowledging that the fees clause was reciprocal, potentially avoiding choice of law problems under Civil Code section 1717. (See our June 11, 2008 discussion of ABF Capital Corp. duology and other decisions on the choice of law issue.) That left appellant crane operator with the argument that the trial court should have apportioned work spent on the personal injury circumstances versus simply defending on the indemnity cross-claim. The appellate court agreed with the lower court that the work was inextricably intertwined, illustrating this reality in these two ways: (1) employer was defending the indemnity cross-claim in part by arguing that employee’s claims were inflated; and (2) employer had to explore personal injury circumstances to minimize potential indemnity exposure by arguing that the employee-crane operator was unreasonable in nature.

June 22, 2012

Zollars v. Kahan, Case No. A130332 (1st Dist., Div. 4 June 21, 2012) (unpublished) involved an owner who successfully sued a foreclosure sale trustee for failure to serve foreclosure documents on junior lienholders. Owner did recover attorney’s fees from foreclosure trustee under Code of Civil Procedure section 1021.6, an indemnity statute allowing recovery of fees under certain circumstances (mainly seen in construction defect disputes but also applicable to other indemnity situations). Owner was awarded $150,000 in fees, but appealed because he did not receive another $40,000 in requested fees not allowed and some additional litigation expenses.

His appeal was unsuccessful.

He first argued that the trial court erred in requiring him to bring his section 1021.6 fees request through the vehicle of a post-trial motion proceeding, but this was rejected because the governing language of the statute so required. (In a footnote, the appellate court indicated contrary prior law was superseded by enactment of the statute itself.)

Owner then contended that he should have been awarded $14,626.28 in costs in addition to attorney’s fees. Wrong, also, because section 1021.6 makes no mention of costs and litigation expenses cannot be shoehorned into a fee rubric.

Finally, the challenges to the amount of the award did not surmount the formidable abuse of discretion standard. In this one, the fee award was affirmed.

May 01, 2012

In our April 11, 2011 post, we discussed Toro Enterprises, Inc. v. Pavement Recycling Systems, Inc., a Second District, Division 6 unpublished decision in which a subcontractor recovered attorney’s fees against a general contractor under a broadly-worded fee clauses relating to “dispute resolution.” We can now report that this decision was certified for publication on May 1, 2012.

Ms. Thornton, near the end of her term as a Board member of the California Unemployment Insurance Appeals Board, was appointed as an ALJ for the Board, a hire that was subsequently investigated by the State Auditor and Sacramento District Attorney’s Office for potential Government Code/state conflict of interest law violations. Ms. Thornton retained an attorney to assist with the investigations, incurring fees and costs when counsel dealt with the investigating authorities. Then, she made a claim under the Government Claims Act for reimbursement of fees/costs, but the claim was rejected. She brought a civil suit seeking reimbursement, basing her claims upon Government Code section 996.4 and Labor Code section 2802.

Reimbursement was not appropriate under Government Code sections 995 and 996.4 because it could only be triggered if there was a commencement of a civil action or judicial proceeding in court, not by just law enforcement agency investigations.

So, too, no fees or costs were covered by Labor Code section 2802, because that provision only required the employer to cover third-party claims arising out of a lawsuit against the employee arising out of the course and scope of her employment, again not encompassing expenses incurred in responding to law enforcement investigations. Even if section 2802 could be stretched that far, it would be “trumped” anyway by the specific provisions of Government Code section 996.4 under the “specific over general” cannon of statutory interpretation.

February 29, 2012

Corporations Code Section 317(d) Did Sustain Large Fee Awards Against Non-prevailing Former Employer.

Parcell Steel Co., Inc. v. Sauer, Case No. G043444 (4th Dist., Div. 3 Feb. 28, 2012) (unpublished) is a situation where various defendants (former employees) were awarded substantial attorney’s fees against plaintiff former employer when employer lost confidential use of information claims after one claim was summarily adjudicated out and the rest of the claims were rejected by the jury. The hit went this way: $30,611.27 in costs and $272,109.50 in fees awarded to one group of defendants, and $14,496.46 in costs and $214,270 in fees to another group of defendants.

Plaintiff in this one lost a suit to recover a commission for work on a Bahama resort project in a summary judgment won by defendants, but the judgment was reversed in a prior appeal to see if plaintiff could get compensation for nonbroker services. Defendants then requested attorney’s fees of $215,000, but the lower court denied them on the basis that the fees clause was a true indemnification clause rather than a true fees clause. The earlier appellate reversal did not address the proper construction of the indemnification clause. The lower court then tried plaintiff’s quantum meruit claim and awarded plaintiff $94,000. Plaintiff then moved to recover $237,150 in attorney’s fees under the indemnification clause which it claimed allowed recovery of fees to it. The lower court denied this request.

Because defendants’ cross-complaint alleged damages for plaintiff’s failure to obtain financing, the indemnification fee language did govern direct actions between the two sides. Plaintiff’s defeat of the cross-complaint allowed for recovery of attorney’s fees, because the clause did not require a traditional “prevailing party” as that term is used under Civil Code section 1717. The clause indeed was not a true fees clause, but its wording did allow for recovery of fees in direct indemnification actions. (Zalkind v. Ceradyne, Inc., 194 Cal.App.4th 1010, 1022 (2011); Dream Theater, Inc. v. Dream Theater, 124 Cal.App.4th 547, 555 (2004).) Reversed and remanded for a fee redetermination, if any.

November 20, 2011

Longstanding Case May Be Finally Resolved Except for Appeal Costs for Two Parties.

In our February 20, 2009 post, we looked at a complicated, multi-party construction dispute that produced some interesting fee rulings. That case was Jeld-Wen, Inc. v. Pacific Coast Roofing Corp. Because the 2009 appellate opinion remanded for reconsideration of certain issues, the close-to-final chapter to the litigation saga looks like it has come down in Jeld-Wen, Inc. v. Pacific Coast Roofing Corp., Case No. D056204 (4th Dist., Div. 1 Nov. 17, 2011) (unpublished)--a 72-page opinion whose highlights we now summarize.

Certain fee awards under the indemnity costs provisions of Code of Civil Procedure section 1038 were affirmed. Earlier, they were reversed because a summary adjudication (versus summary judgment) does not give rise to entitlement under section 1038. However, after remand, a development occurred in the form of a voluntarily dismissal of a remaining claim that effectively turned the summary adjudication into a summary judgment. So, the defense indemnity costs were appropriate. The dismissal did not deprive the trial court of the ability to adjudge fee requests, and the cost award was still recoverable even though an insurance carrier paid those costs (put another way, they were still “incurred” under Lolley v. Campbell, 28 Cal.4th 367, 373 (2002)). Also, attorney declarations on time expeded were sufficient, since contemporaneous time records are not a substantiation requirement in state court cases--unlike the counterpart rule in federal courts. (Martino v. Denevi, 182 Cal.App.3d 553, 559 (1986).)

However, the section 1717 fee award had to be overturned, because the voluntary dismissal did preclude such an award under section 1717. (Kelley v. Bredelis, 45 Cal.App.4th 1819, 1837 (1996).)

Although there are other tidbits on somewhat unique procedural issues, these are the highlights -- did we do good on summarizing a 72-page decision? However, two parties did get costs on appeal (which might include fees), so there may be one more appeal in the hopper for us to blog on in the future.

First, after finding no state or federal decision precisely on point, the appellate court decided that “indemnify” under Labor Code section 2802 usually relating to third-party claims does not extend to an employee being able to obtain reimbursement of fees expended in defending against an employer’s claims. Justice Ikola found that “the more expansive fabric of law” relating to fees (such as the American Rule and other fee-shifting principles) did not condone stretching the reach of section 2802 to employer claims.

Second, Corporations Code section 317--which mandates indemnification of corporate agents under certain circumstances--did not apply, because an LLC was involved (rather than covered corporations under section 317). Although there are LLC Corporations Code provisions that permit indemnification, nothing in the LLC Act has a analog mandatory indemnification provision.

Employee must have been unhappy in losing his attempt to obtain reimbursement of almost $90,000 in attorney’s fees, even though the trial and appellate courts saw things the same way.

May 01, 2011

Failure to Apportion Between Defense and Cross-Complaint Prosecution Work Was the Flaw in the Fee Award.

Depending on the fee-entitlement statute, apportionment may be a mandatory exercise. Although it usually is discretionary and may not be needed where work was intertwined, these principles do not necessarily apply to all fee situations. Sheridan v. Fladeboe Volkswagen, Inc., Case Nos. G043375/G043706 (4th Dist., Div. 3 Apr. 29, 2011) (unpublished), a 3-0 opinion authored by Acting Presiding Justice Rylaarsdam, illustrates this point well.

There, plaintiff won a Song-Beverly Consumer Warranty Act case against defendant Fladeboe. Co-defendant/cross-complaint VW won a summary judgment against plaintiff and was awarded fees of over $235,000 by the trial court as against Fladeboe under its indemnity cross-complaint. This fee award was reversed and remanded for recalculation.

No one denied that VW’s implied indemnity cross-claim win qualified it to an award of fees under Code of Civil Procedure section 1021.6. However, this section only allows an award of fees “in connection with defending against plaintiff’s complaint,” not for time expended in prosecuting the cross-complaint. The basis for reversal and remand was that the fee request invoices commingled defense and cross-complaint prosecution work such that the fee matter had to be reconsidered after proper excising the cross-complaint prosecution work.

BLOG UNDERVIEW--We recently learned that Presiding Justice David Sills has announced his retirement from our local Santa Ana appellate court, effective June 1 of this year if the report we read is correct. Presiding Justice Sills has served Orange County well for a number of years in a number of roles, namely, former mayor of Irvine, an Orange County Superior Court judge, and 4/3 appellate justice. We wish you the best as you spend time on other things after finishing your distinguished public service.